The Role of R&D in Entrepreneurial Finance and Performance

43 Pages Posted: 18 Oct 2013 Last revised: 13 Oct 2014

See all articles by Alicia Robb

Alicia Robb

University of Colorado at Boulder; Next Wave Impact; Federal Reserve Banks - Federal Reserve Bank of Atlanta

Robert Seamans

New York University (NYU) - Leonard N. Stern School of Business

Date Written: March 7, 2014

Abstract

We extend theories of the firm to the entrepreneurial finance setting and argue that R&D-focused start-up firms will have a greater likelihood of financing themselves with equity rather than debt. We argue that mechanisms that reduce information asymmetry, including owner work experience and financier reputation, will increase the probability of funding with more debt. We also argue that startups that correctly align their financing mix to their R&D focus will perform better than firms that are misaligned. We study these ideas using a large nationally representative dataset on start-up firms in the United States.

Keywords: entrepreneurship, entrepreneurial finance, information asymmetry, firm performance, research and development, transaction cost economics

JEL Classification: D23, G3, M13, O32

Suggested Citation

Robb, Alicia and Seamans, Robert, The Role of R&D in Entrepreneurial Finance and Performance (March 7, 2014). Available at SSRN: https://ssrn.com/abstract=2341631 or http://dx.doi.org/10.2139/ssrn.2341631

Alicia Robb

University of Colorado at Boulder ( email )

Leeds Business School
Boulder, CO 80309
United States

Next Wave Impact ( email )

7455 Park Lane Road
Longmount, CO 80503
United States

Federal Reserve Banks - Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Robert Seamans (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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